§675 — Title 26 Internal Revenue Code | U.S. Code

§675 Administrative powers

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter J— - Estates, Trusts, Beneficiaries, and Decedents › Part PART I— - ESTATES, TRUSTS, AND BENEFICIARIES › Subpart Subpart E— - Grantors and Others Treated as Substantial Owners › § 675

Last updated Apr 6, 2026|Official source

Summary

The person who created a trust is treated as owning any part of it if they keep certain controls or take certain loans. One way is if the trustmaker or someone who cannot object can buy, sell, or otherwise deal with trust property or income for less than a fair price without anyone who could object having to approve. Another is if the trustmaker or that same kind of person can borrow trust money or property without fair interest or security. The trustmaker is also treated as owner if they actually borrowed trust money or property and did not fully repay it before the tax year, unless the loan had fair interest and security and was made by a trustee who is not the trustmaker and not under the trustmaker’s control. Finally, the trustmaker is treated as owner if any person who is not acting as a fiduciary can run the trust’s administration without a fiduciary’s okay — for example, by directing votes of stock, controlling investments in certain corporate stock holdings, or swapping trust property for other property of equal value. For times when someone is the grantor’s spouse, references to the grantor include that spouse.

Title 26, §675

Internal Revenue Code — Source: USLM XML via OLRC

The grantor shall be treated as the owner of any portion of a trust in respect of which—

(1)A power exercisable by the grantor or a nonadverse party, or both, without the approval or consent of any adverse party enables the grantor or any person to purchase, exchange, or otherwise deal with or dispose of the corpus or the income therefrom for less than an adequate consideration in money or money’s worth.

(2)A power exercisable by the grantor or a nonadverse party, or both, enables the grantor to borrow the corpus or income, directly or indirectly, without adequate interest or without adequate security except where a trustee (other than the grantor) is authorized under a general lending power to make loans to any person without regard to interest or security.

(3)The grantor has directly or indirectly borrowed the corpus or income and has not completely repaid the loan, including any interest, before the beginning of the taxable year. The preceding sentence shall not apply to a loan which provides for adequate interest and adequate security, if such loan is made by a trustee other than the grantor and other than a related or subordinate trustee subservient to the grantor. For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.

(4)A power of administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity. For purposes of this paragraph, the term “power of administration” means any one or more of the following powers: (A) a power to vote or direct the voting of stock or other securities of a corporation in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; (B) a power to control the investment of the trust funds either by directing investments or reinvestments, or by vetoing proposed investments or reinvestments, to the extent that the trust funds consist of stocks or securities of corporations in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; or (C) a power to reacquire the trust corpus by substituting other property of an equivalent value.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1988—Par. (3). Pub. L. 100–647 inserted at end “For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.”

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.